Kapil Health foods case study

8/19/2019 Kapil Health foods case study

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Acknowledgment

I have taken efforts in this project. However, it would not have been possible without the

kind support and help of many individuals and organizations. I would like to extend my

sincere thanks to all of them.

I am highly indebted to Mrs. Richa Agarwal our module leader of Supply Chain

Management for her guidance and constant supervision as well as for providing necessary

information regarding the project & also for her support in completing the project. Also I

would like to express my gratitude towards my parents and to my colleagues in developing

the project and people who have willingly or unwillingly helped me out with their abilities.


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Sr. No.

Particulars Page No.

1 Introduction 1

2 Structure of the Company 1

3 Major issues and Success Story 2

4 Product line , Packaging and Raw material Consumption 3

5 Procurement and Packaging Consumption 4

6 Inbound Logistics 7-8

7 Outbound Logistics 8-9

8 Case Study Answers 10-16

9 Conclusion 17

10 Harvard Referencing 18

Index


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Introduction

• Kapil Health Food Products was established in 1960 as a subsidiary of an

American Multinational pharmaceutical company.

• It has a total capital outlay of Rs.50 million.

• It started its manufacturing operations at Nahar, which is situated 325 kilometers

west of New Delhi & has a population of 8,500.

• Nahar is a semi-urban town supported by a village economy.

• Kapil is an ISO 9002 accredited manufacturing firm with state – of-the-art

manufacturing & packaging facilities.

Structure of the Company

• In 1980, the foreign holding of the company was diluted to 51%, and 49% shares

were offered to Indian nationals and financial institutions.

• The company was registered as Kapil Health Products Limited & milk is the

major raw material for the firm’s product, its major focus is on the diary

development activities.

• It undertakes programmes like animal health; animal insurance, mechanized

milking etc. It spends around 750 million rupees per annum on the above

activities.

• It is now leading health food manufacturing company contributing to 32% of the

total health food powder production in India.

•

Major competition is from leading brands like Bournvita, Boost, Horlicks,

Nutramul and Maltova & ayurvedic pharmaceutical companies in India.

• All these ayurvedic pharmaceutical companies command around 10-12% of the

health food market in India.


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Major Issues

• Wholesalers are unable to fulfil two orders in every twenty orders placed by

retailers.

•

Due to severe competition, KHFP is in the process of reviewing its supply chainfor

– Cost reduction

– Enhancing customer service.

• The management is planning to reduce the inventory to less than 10 days at factory

& C&F agents.

• The distribution cost on the present level of sales is at the rate of 8.5%, which they

want to reduce by 40% i.e. from 8.5 they want to bring it down to 5.1%.

• In addition they want to reduce inbound transportation cost by proper planning &

scheduling.

Kapil’s Success Story


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Kapil runs three product lines:

• Health foods, HOR & BOS

•

Ghee.

•

The Company also supplies products in bulk to various repacking stations across

the country to take advantage of freight economy.

Product Packaging at Kapil Health Food Products:

HOR BOS GHEE

500gm 500gm 500gm

1000gm 1000gm 1000gm

- - 2000gm

- - 5000gm

- - 10,000gm

Major Raw Material Consumption MT/Day

Item Consumption

Wheat Flour 28Malted Barley 26

Malt Extract 35

Sugar 8

Milk Powder 14

Liquid Milk (Litres) 1,50,000


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Procurement

Since the numbers of raw materials are 6, the management thinks that it has a good

control over the inventory & its suppliers.

Barring milk is the major raw material, & NO OF VENDORS ARE RESTRICTED TO 4OR 5.

Packaging Consumption (Units/day)

PROCUREMENTDEPARTMENT

PURCHASE

MANAGER

PURCHASE

MANAGER

PURCHASE

MANAGER

PROCUREMENT

MANAGER


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Inbound Logistics

• The movement of materials from suppliers and vendors into production processes

or storage facilities.

•

Activities associated with receiving, storing, and disseminating inputs to the product.

Milk Flow System


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Modified Production

Outbound Logistics

The factory has 4 Regional offices at major metros headed by:

•

The process related to the movement and storage of products from the end of the production line to the end user.

MALTED

BARLEY+WHAET

FLOUR

WASHING &

MILK+VITAMINS

EVAPORATION &

FOODSEPARATION

OVEN DRYING &

FOOD SCALPING

GRINDING&

SUGAR+SMO

MIXING & BULK

PACAKAGINGWAREHOUSING

QUALITY &

PACAKAGING

CENTRES

DESPATCH

GENERAL

MANAGER

SALES ADMIN C & F AGENTS WHOLESALERS

REGIONAL

MANAGER


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• Outbound Logistics’ is the part of the supply chain process, such as custom

assembly or private labelling that moves, stores, and adds value.

Distribution System

The Product Requirement flows from

•ORGANISING

•DISPATCHES

8 C & F

AGENTS

• FORECASTED

•REQUIREMENT

45

STOCKIST

S

•CONSUMPTION

•PATTERNS

200

WHOLES

ALERS

C & F AGENTSREGIONAL

OFFICESTOCKISTS WHOLESALERS RETAILERS

INVENTORY HOLDING

WAREHOUSE 15-18 DAYS

C & F AGENTS 12-15 DAYS

STOCKISTS 8-10 DAYS

WHOLESALERS 7-8 DAYS

•


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Q-1 Map the supply chain of KHFL for weak linkages.

Ans :- Present Supply chain of KHFL is

Suggested Supply Chain due to weak linkages


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The point from Rakhra can be used in order to be used during urgent requirement.

And Point A, B, C, D can serve as collection centres for the rest of the point sending the

raw material to the factory.


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Q-2 For Improvements in critical areas in KHFL supply chain , what measures do

you suggest to reduce cost and improve customer service?

Ans :-

Supply chain management is directly related to a company’s customer service. And if a

company has great customer service, it can get a leg up on the competition. To be

successful, a small business must take advantage of every opportunity it can to stand out

from the competition.

Good supply chain management boosts your company’s customer service by allowing

you to do three things:

Deliver products to customers faster and with greater accuracy.

Track shipments to ensure they reach their destination safely. Maintain optimal inventory levels so you always have what customers want in stock.

KHFL should Focus on:-

INVENTORY MANAGEMENT:

• Reduce the inventory at warehouse i.e. from 15-18 to 12-15.

• This can be done by providing discounts to C&F agents at 3% discount rate.

•

This would automatically provide a benefit of discounts to stockiest, wholesalers

via C&F agents.

• Hence ultimate result would be that the inventory level at warehouse would lower

down and will increase at C&F agents, stockiest and wholesaler level.

Thus the increase in the stock will ensure the C&F order filling rate reaches to 100% than

the present one at 89% where they are unable to fulfil two orders in every twenty order

placed by retailers.

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Q-3 The Major cost-spinner in KHFL logistics operation is inbound transportation.

Do you agree with this? How can it be reduced?

Ans :-

In order to save costs:-

1. Use of Mini-trucks from all milk collection centres to Points A,B,C,D and a direct

Mini-Truck from E to the Factory. Also assuming high quantity use of large trucks

only from points to the factory.


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2. C&F Agents :- It is observed that the job of C&F agents is just the provision of

stock to the regional office’ demand. If possible company should invest in 8

different warehouses from where provision of the stock can be done to the

regional office’s demand. It will save costs in long term and also reduce the

commission of the C&F agents.


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3. Manufacturing Resource Planning-MRP II

MRP II system provides data on the cost of production, machine time, labour time

and material consumed and the final output to accounting and finance. As the new

milk collection centres and processing units will be setup, so there will be

requirement MRP II.

Manufacturing resource planning (MRP II) is an integrated method of operational and

financial planning for manufacturing companies. MRP II serves as an extension

of MRP(closed loop manufacturing resource planning, also abbreviated as CLMRP).

http://searchmanufacturingerp.techtarget.com/definition/closed-loop-manufacturing-resource-planning-MRPhttp://searchmanufacturingerp.techtarget.com/definition/closed-loop-manufacturing-resource-planning-MRPhttp://searchmanufacturingerp.techtarget.com/definition/closed-loop-manufacturing-resource-planning-MRPhttp://searchmanufacturingerp.techtarget.com/definition/closed-loop-manufacturing-resource-planning-MRP


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The typical MRP II system employs a modular organizational structure. Modules keep track

of, and regulate, specific characteristics and functions of the entire organization. Examples

include, but are not limited to, the following:

Product design

Product specifications

QC (quality control)

QA (quality assurance)

Shop floor control

Order management

Purchasing

Inventory

Cost calculation

Cost reporting

General accounting

Cash flow

Tax calculation

Tax payments

The MRP II process is carried out by a synergistic combination of computer and human

resources. The MRP II differs fundamentally from point contact planning, in which

individual characteristics and functions have their own dedicated systems.

http://whatis.techtarget.com/definition/quality-control-QChttp://whatis.techtarget.com/definition/quality-control-QChttp://searchsoftwarequality.techtarget.com/definition/quality-assurancehttp://searchsoftwarequality.techtarget.com/definition/quality-assurancehttp://searchfinancialapplications.techtarget.com/definition/order-managementhttp://searchfinancialapplications.techtarget.com/definition/order-managementhttp://searchfinancialapplications.techtarget.com/definition/order-managementhttp://searchsoftwarequality.techtarget.com/definition/quality-assurancehttp://whatis.techtarget.com/definition/quality-control-QC


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Conclusion

Supply Chain Management (SCM) is an essential element to operational efficiency. SCM

can be applied to customer satisfaction and company success, as well as within societal

settings, including medical missions; disaster relief operations and other kinds ofemergencies; cultural evolution; and it can help improve quality of life. Because of the vital

role SCM plays within organizations, employers seek employees with an abundance of

SCM skills and knowledge. Supply chain management is critical to business operations and

success.

Through Basic solutions provided in the above presentation as well as through complex

calculations of vehicle scheduling and distribution network design options it is possible for

Kapil health food products to reach the intended level of optimum supply chain

management.

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Harvard Referencing

How to Improve Customer Service with Supply Chain Management | Fishbowl. 2016. How to

Improve Customer Service with Supply Chain Management | Fishbowl . [ONLINE] Available

at:https://www.fishbowlinventory.com/articles/supply-chain-management/how-to-improve-customer-

service-with-supply-chain-management/. [Accessed 08 March 2016].

Manufacturing resource planning - Wikipedia, the free encyclopedia. 2016. Manufacturing

resource planning - Wikipedia, the free encyclopedia. [ONLINE] Available

at:https://en.wikipedia.org/wiki/Manufacturing_resource_planning. [Accessed 08 March 2016].

What is Manufacturing resource planning (MRP II)? - Definition from WhatIs.com.

2016. What is Manufacturing resource planning (MRP II)? - Definition from WhatIs.com.

[ONLINE] Available at:http://whatis.techtarget.com/definition/Manufacturing-resource-planning-

MRP-II. [Accessed 08 March 2016].

. 2016. . [ONLINE] Available at: http://faculty.ineg.uark.edu/rmeller/web/CELDi-

PI/InboundTransportation-CH-Robinson.pdf . [Accessed 08 March 2016].

. 2016. . [ONLINE] Available

at: http://nptel.ac.in/courses/110106046/Module%2011/Lecture%204.pdf . [Accessed 08 March

2016].
https://www.fishbowlinventory.com/articles/supply-chain-management/how-to-improve-customer-service-with-supply-chain-management/https://www.fishbowlinventory.com/articles/supply-chain-management/how-to-improve-customer-service-with-supply-chain-management/https://www.fishbowlinventory.com/articles/supply-chain-management/how-to-improve-customer-service-with-supply-chain-management/https://www.fishbowlinventory.com/articles/supply-chain-management/how-to-improve-customer-service-with-supply-chain-management/https://en.wikipedia.org/wiki/Manufacturing_resource_planninghttps://en.wikipedia.org/wiki/Manufacturing_resource_planninghttps://en.wikipedia.org/wiki/Manufacturing_resource_planninghttp://whatis.techtarget.com/definition/Manufacturing-resource-planning-MRP-IIhttp://whatis.techtarget.com/definition/Manufacturing-resource-planning-MRP-IIhttp://whatis.techtarget.com/definition/Manufacturing-resource-planning-MRP-IIhttp://whatis.techtarget.com/definition/Manufacturing-resource-planning-MRP-IIhttp://faculty.ineg.uark.edu/rmeller/web/CELDi-PI/InboundTransportation-CH-Robinson.pdfhttp://faculty.ineg.uark.edu/rmeller/web/CELDi-PI/InboundTransportation-CH-Robinson.pdfhttp://faculty.ineg.uark.edu/rmeller/web/CELDi-PI/InboundTransportation-CH-Robinson.pdfhttp://faculty.ineg.uark.edu/rmeller/web/CELDi-PI/InboundTransportation-CH-Robinson.pdfhttp://nptel.ac.in/courses/110106046/Module%2011/Lecture%204.pdfhttp://nptel.ac.in/courses/110106046/Module%2011/Lecture%204.pdfhttp://nptel.ac.in/courses/110106046/Module%2011/Lecture%204.pdfhttp://nptel.ac.in/courses/110106046/Module%2011/Lecture%204.pdfhttp://faculty.ineg.uark.edu/rmeller/web/CELDi-PI/InboundTransportation-CH-Robinson.pdfhttp://faculty.ineg.uark.edu/rmeller/web/CELDi-PI/InboundTransportation-CH-Robinson.pdfhttp://whatis.techtarget.com/definition/Manufacturing-resource-planning-MRP-IIhttp://whatis.techtarget.com/definition/Manufacturing-resource-planning-MRP-IIhttps://en.wikipedia.org/wiki/Manufacturing_resource_planninghttps://www.fishbowlinventory.com/articles/supply-chain-management/how-to-improve-customer-service-with-supply-chain-management/https://www.fishbowlinventory.com/articles/supply-chain-management/how-to-improve-customer-service-with-supply-chain-management/

Kapil Health foods case study

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